How can we stop tax avoidance? | UK Uncut's Ellie Mae O'Hagan and City AM's Allister Heath

Public attention to tax avoidance is at an all-time high. UK Uncut's Ellie Mae O'Hagan discusses the system's flaws with financial journalist Allister Heath

Forty Starbucks branches will be targeted on Saturday by UK Uncut, which has drawn unprecedented public attention to tax avoidance schemes. Ellie Mae O'Hagan, who has worked with UK Uncut since its inception, goes head to head with City AM editor Allister Heath. Interview by Aida Edemariam.

Aida Edemariam: Has UK Uncut led the way in the tax avoidance debate?

Ellie Mae O'Hagan: I think what UK Uncut did was make it sexy. Instead of talking about the intricacies of tax, it offered spectacle and civil disobedience – and linked tax avoidance to the cuts. If it had come along in 2007 I'm not sure it would have grabbed the headlines, but its first protest about Vodafone [in 2010] concerned a £7bn cut from the welfare bill and a £6bn cut in tax [for Vodafone]. It's created a public conversation that is very much anti-tax avoidance, and politicians have had to respond.

Allister Heath: I agree tax avoidance is a bad thing, and I think we should have a fundamental change of the tax system. The difference is that I don't want to increase the overall tax burden, but decrease it. We have a horribly complicated, flawed tax system, and I think it's vital that politicians do something about it, because the legitimacy of the system is declining. People don't trust it. They think it's arbitrary, and they're right.

AE: In this week's autumn statement, George Osborne committed £154m to tackling tax avoidance. Do you think that would have happened if there hadn't been these protests?

AH: In every budget I can remember, there's been an item saying, "Here is an estimate of how much money we're going to get from tackling tax avoidance." There's more effort in that direction now than there was five or 10 years ago, but it's a continuum.

EO: The difference is that whereas people used to accept it as inevitabile, now they don't – they see it as a moral scandal. Before, politicians could get away with saying yes, it's terrible, tax avoidance is bad, but the government is now in a position where they will have to do something – it's politically impossible for them not to.

AH: Your protests have been very successful. But there are new avoidance schemes being created all the time. For example, the chancellor talked about new tax breaks for shale gas. He also introduced a change to the capital allowance system for corporate taxation – that's effectively a massive tax avoidance scheme. What I see is a government constantly fiddling with the system. The number of allowances and loopholes in the tax system is probably at an all-time high. We've got one of the most complex tax systems in the world – there's not a single person who understands it in its entirety. There are two ways income can be generated: from labour, ie from wages and bonuses, or from capital – interest payments, dividends and so on. You should identify all income created in the UK and tax it once at a flat, low-ish rate, and that's it. The reality, in this country, is that the poor pay a huge amount of tax – they pay a huge amount of VAT, they pay huge amounts of duty on alcohol and tobacco.

EO: That's why UK Uncut occupies shops like Starbucks. Because it wants the majority of tax in this country to come from companies that can afford it, and not from people who can't.

AH: Companies, at the end of the day, don't exist – they're just a bundle of contracts. As far as I'm concerned, companies are made up of people – some people provide capital, some people work there. And I think everybody should be taxed. Incidentally, I don't agree with the argument that a company doesn't add any value to society unless they pay tax. I think they add value in other ways.

EO: I'm sure if we were sitting here talking about some low-income person who'd been found to be fiddling their books, we wouldn't be saying, "Oh, but they contribute to society in other ways" – that argument just wouldn't come up. I believe the difference between people on lower incomes "evading" tax and people on higher incomes and companies "avoiding" tax is that the latter are rich enough to afford an accountant to help them do it.

AH: But one is legal and one is not legal, and that's a very important difference. People should be protesting at MPs. All these politicians grandstanding on select committees, saying they're disgusted – well, wait a second – they're the ones who voted through finance acts. They're the ones who voted for budgets. So why can't they take responsibility and change the law?

AE: What would your flat tax be?

AH: Probably 30%.

AE: Across the board?

AH: No, no – you pay no tax until about £12,000, because I don't think anyone on the minimum wage should pay income tax – I think that's completely wrong. All income above that should be taxed at 30%, flat rate. I want to look at the whole system from scratch, look at where money is generated in society, and just tax it once – done. No loopholes at all. So any money generated by Amazon in the UK: taxed. You need a complete revolution. But where I differ from others who want to reform the tax system is that I'm not coming from a leftwing perspective.

EO: Well, I am. And for me, a tax system has to be, fundamentally, about redistributing wealth, so that society can be more equal, so that the gap between the richest and the poorest is as small as it can possibly be, and that means a strong welfare state, free healthcare, education which is not governed by how much your parents have earned. The tax system should be enabling all of that.

AH: To me, paying tax is not a moral action in and of itself. But under my system there'd be more economic growth, and there'd be a lot more prosperity for people to share out. In the long run, there might even be more tax receipts. There'd certainly be more opportunity. I think the kind of society I'm talking about would be humane and compassionate.

EO: When they say they want to reform tax, it's all hot air – of course it is. The government has no interest in stopping tax avoidance. The Conservative party receive 50% of their donations from the financial sector, which obviously runs on tax avoidance. I don't think there is any political will at all.

AH: There's a political will to raise cash, right? They need to raise revenues.

EO: And how are they doing that? They're introducing a tax cut for millionaires, they're cutting the welfare bill. They're also using higher VAT. But it's more than possible to stop tax avoidance. And there's no reason why the UK can't begin that process. We often describe ourselves as moral leaders. It's one of the excuses we use to go to war. So why can't we be a moral leader when it comes to tax avoidance, and start reforming our tax system now? I think it's morally incumbent on us to do it.

Allister Heath writes a column for the Daily Telegraph. Ellie Mae O'Hagan is a columnist for Comment is free

• This article was amended on 9 December 2012, to correct the spelling of Ellie Mae O'Hagan.


Interview by Aida Edemariam

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